Germany announces a financial aid package for its bars and restaurants and reduces VAT by 12%

The German Finance Minister has lowered the VAT on meals in bars and restaurants in a bid to assist the food and drinks industry.

“Bars and restaurants will need a boost when they reopen,” says Secretary of State for Finance Sarah Ryglewski.

The German government is making a bid to help the sector, one of the most damaged by the coronavirus crisis, so it can return to normality with prospects for growth and maintenance of employment.

The draft Tax Assistance Law approved today by the Council of Ministers provides for a reduction of the value-added tax (VAT) on meals from the current 19 per cent to 7 per cent. The objective is to support the sector in the reopening period and to alleviate the economic effects of the restrictions still in force.

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“Bars and restaurants will need a boost when they can reopen,” said Secretary of State for Finance Sarah Ryglewski.

At the same time, the cabinet decided that employers’ grants for short-term labour benefits are largely tax-exempt. The prerequisite is that the replacement amount and short-term allowance together do not exceed 80 per cent of lost wages. If more is paid, only the higher part will be taxed. This corresponds to the regulation in the social security law and ensures that payments reach employees without a decrease.

The Ministry of Finance calculates that these measures will cost the state €2,700 million in lost taxes. The rule will take effect on July 1, 2020, and will last until June 30, 2021, once it is approved by the two parliamentary chambers.

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Tony Winterburn

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